SUBJECTS: Budget repair, welfare cuts, energy, APVMA relocation.
SKY NEWS PM AGENDA
WEDNESDAY, 15 FEBRUARY 2017
DAVID SPEERS: We have here Assistant Minister for Industry, Innovation and Science, Craig Laundy and the Shadow Minister for Agriculture, Joel Fitzgibbon. Very good to see you both, thanks for joining us. How are we going to fix this budget? We were aware of this standoff and once again its Groundhog Day. You guys try to push through some spending and you guys say no. Nick Xenophon said no as well so it’s a big problem for the nation though. We have a big threat to our AAA credit rating. Is anyone going to get…
JOEL FITZGIBBON, SHADOW MINISTER FOR AGRICULTURE, FISHERIES, FORESTRY AND RURAL AND REGIONAL AUSTRALIA: I will let Craig answer the question fully because come July he would have been in Government for four years David and in each and every year, this Government has been both taxing more and spending more. So they are the Government and we stand ready always to cooperate and talk about important reform including budget repair. We have supported the majority of the their savings measures but they just don’t know how to run the Parliament, they don’t know how to run economic policy and they certainly don’t know how to do negotiations in the Senate.
SPEERS: Well Craig Laundy, you are in Government and you have been there for four years.
CRAIG LAUNDY, ASSISTANT MINISTER FOR INDUSTRY, INNOVATION AND SCIENCE: Can I go first, sorry.
FITZGIBBON: Are you going to talk about the swimming?
LAUNDY: No I don’t want to talk about the swimming, I’m trying to forget it. But look, Joel is right, they do support us when it suits. So for three years they played politics with $6 billion worth of savings and they said no. Now through a combination of, A, working out that they were way behind us anyway in budget deficits, they were actually increasing and David Feeney committing hari-kari on your show, they end up in the run-up to the election saying yes to that $6 billion. If they had said yes to that three years earlier there’s $18 billion less in debt. Now they are happy to support when it suits or when they are in trouble, but then they want to come and play holier than now, nope sorry.
FITZGIBBON: We support them when they put forward (inaudible)
LAUNDY: Why didn’t you support it day one Joel?
FITZGIBBON: They put forward the current sort of priorities.
SPEERS: Let’s get to that right. We hear this is your fault, your fault, your fault, when we look at the specifics of what is in this and let’s just pick out a couple. Family end of year supplements to family payments. You guys want to get rid of them and you are willing to boost the fortnightly payments a bit along the way, what is wrong with that?
FITZGIBBON: Tony Abbott ran a jihad…
SPEERS: Forget Tony Abbott.
FITZGIBBON: He retained them. The point here David is this, if you are on a fixed low income you’re living week to week and pay to pay. When government comes along, and $50 to Craig and I doesn’t seem like a lot of money, but if you rip $50 out of a very modest weekly budget for a pensioner or an unemployed person or a sole parent, you have real and meaningful impact. Taking money away from people is always difficult.
SPEERS: That’s a fair point, This is one of the other measures. For those under 25 you guys want to put them on Youth Allowance, $50 a week less. Is that too tough?
LAUNDRY: David you are looking at things in isolation. Our welfare budget already consumes ballpark half of our tax receipts.
SPEERS: We’ll get to the specifics, that’s where it gets difficult.
LAUNDY: But it is also growing yes, but you’ve got to work inside and we are already running budget deficits. You’ve got to work inside funding envelopes. Then alone, when you get things like the NDIS and there has been a lot of criticism of this and I’m not going to criticise, David. I’m going to take a different approach. In 2013-14 in good faith, they came up with a 10 year plan. However, you’ve seen the further you forecast out in budgetary measures, the less accurate you get. We have already found a $5 billion hole last year which Minister Porter has filled. We have another $3 billion hole. Guess what? As we get closer to 2022-23, we may find we need more. Now the problem is when you’ve got funding constraints to start with you’ve got to look across the board and you have mentioned the Newstart. Okay, it’s like Labor, they had to make a decision to put single mums and change their payment scheme at the time and we supported that.
SPEERS: Own that and defend it and that’s my point here. It’s a lot easier to say this welfare envelope is too expensive, correct, but when you get to actually what you are going to do to this young job seeker, are you willing to say they deserve to lose $50?
LAUNDRY: David, we have other programs running in conjunction with this, like the training scheme for the unemployed. So you can’t look at policy in isolation, that’s with I’m saying. It is a massive document in the budget. If you’ve got incoming reoccurring expenditure starting, and you are already borrowing brass, because you are in deficit, you’ve got to have a serious look like reducing Family Tax Benefit B 18 to16.
SPEERS: Given all of that and the threat to the bottom line, and we are going to hit the debt ceiling pretty soon, the credit rating is a bit worrying, can we really afford the company tax cut?
LAUNDY: The short answer is yes. Because take today, the Commonwealth Bank has made, what $5 billion I think they have announced?
FITZGIBBON: $7 billion in tax cuts will go to the major banks.
LAUNDY: $5 billion, but I’m glad you say that. Company tax rate is 30 per cent today. What happens? Today the Commonwealth Bank has announced they are releasing 70 per cent of their after profit tax in dividends. Guess what happens in this country? The tax officers aren’t dopes, that goes to investors and shareholders. You pay top up tax at your marginal rate. No one has this discussion. Tax is complex and what companies do, especially small and family business is they leave the dividends inside the company structure which is what is called retained earnings. They use that as capital to grow their business and then they employ more people as they grow their business. That is the science here. Now what have we done since we have come to Government? In the last 12 months there have been 173,000 jobs created in the small business sector. We want that as the engine room to flourish moving forward. There’s 102,000 jobs as the Prime Minister said in manufacturing in the last 12 months. Every time you hear job losses you hear Labor say jobs, jobs, jobs. That’s how it works David but it’s complex.
SPEERS: How will you actually pay for that $48 billion?
LAUNDY: It does… you pay from it from increased receipts in your PAYE tax receipts. That’s how you pay for it. It’s a multiplier effect. That’s what I’m saying. Everyone just wants to focus… tax is no different to welfare, you can’t focus on it in isolation. It is part of an interacting living, breathing, business economy.
SPEERS: Yeah ok, I may be totally wrong here but if you’re saying it pays for itself because more people are employed and pay more tax, why then is Treasury saying it’s going to cost $48 billion?
LAUNDY: Because it’s a line item, it does reduce the revenue on that line item. But the multiplier effect in other areas is what… Forecasting everything, it’s all interactive here.
SPEERS: Why isn’t that positive impact recorded in the budget?
LAUNDY: It is, through PAYE tax receipts increasing over time.
SPEERS: So you’re saying there’s no net cost to the budget?
LAUNDY: I’m saying, if you want to.. well for two reasons, if you want businesses to invest, reinvest in themselves at greater rates, cause don’t forget, you can leave it at 30 and they’ll invest what they’ve got left…
SPEERS: Are you saying there’s no net cost to the budget?
LAUNDY: It will be a net benefit over time.
SPEERS: Why then is it recorded as a net cost?
LAUNDY: Because the line item decreases, you get an increase in the PAYE tax line item.
SPEERS: But why isn’t that there in the budget?
LAUNDY: It is.
SPEERS: So therefore there’d be no net cost to the budget.
LAUNDY: There’d be a net benefit over time of company tax cuts….
SPEERS: Does the budget say that?
LAUNDY: Yes because the PAYE tax line increases over time, that’s all factored in the modelling.
SPEERS: That’s what the budget says? It says, it’s all factored in?
LAUNDY: The PAYE tax line increases over the next two years, three years, four years, five years, because as wage growth happens, and more people are employed, employment growth happens, you get more tax receipts.
SPEERS: well there you go, what are you worried about, it’s going to help the budget.
FITZGIBBON: I don’t quite agree with Craig’s analysis, as much as I love him. The important point here is that yes, a competitive tax regime is important. It is true that obviously lower tax rates can stimulate the economy, I think that might have been what Craig was trying to say. But at the end of the day David it is about priorities. Now the Labor Party in Government has done more on tax reform, than Craig’s Party could ever –
SPEERS: Do you believe this argument, do you accept that cutting company tax is going to generate higher PAYE returns?
FITZGIBBON: Not in the terms as Craig put it. But I am accepting lower taxes can stimulate an economy but I don’t accept this sort of “trickle down story “which suggests, that Craig might suggest, that the guy he is taking the Newstart off is suddenly going to get a great boost and a perfect job opportunity because Craig reduced the company tax rate. That is not the way it happens. Craig says let’s not take things in isolation – I say why don’t we take things in isolation – why has the Government in all these measures, in an Omnibus Bill, holding a gun to everyone’s head and said if you want this one – you have got to vote for this one too?
SPEERS: You are clearly not going to agree on company tax cuts and I doubt you are going to agree on negative gearing even though you guys want to do it and you don’t.
FITZGIBBON: That is real reform.
SPEERS: Let me throw a couple of scenarios at you- what about keeping a deficit levy in place?
LAUNDY: You can’t trade insolvently as a company, let alone a country, and we need to increase it over time.
SPEERS: What does that mean? Yes?
LAUNDY: You need to increase it , yes. We have to function as a government. You can’t stop functioning as a government.
SPEERS: You wouldn’t have a problem keeping it in place?
LAUNDY: No, no it needs to move forward. If we need to increase the debt limit –
SPEERS: No I am talking about the deficit levy – the deficit levy.
LAUNDY: Oh sorry – the deficit levy - I thought you meant the actual ceiling of the deficit.
SPEERS: no, no
LAUNDY: The deficit levy was temporary. You are taking the top taxpayer – and I know this has been a very effective sell by Labor. You know, “tax cuts for millionaires”. A millionaire pays $460,000 in tax – an effective rate of 46 cents in the dollar. The equity in our tax system-
SPEERS: You wouldn’t support –
LAUNDY: - sits inside the existing progressive tax system. Yes, it was put in for a temporary reason, it was always going to fall away. It is not that we are taking it, it falls away by legislation and that’s how it should.
SPEERS: And the Medicare levy? Can it go up any more?
LAUNDY: Joel – you’ve been silent?
FITZGIBBON: No Jenny Macklin has talked about special purpose uses – Medicare levy to pay for NDIS – sure.
SPEERS: There is no increase beyond that?
FITZGIBBON: There is no magic pudding with the Medicare levy, I can’t remember the numbers now but I have looked at it many times. A significant increase in the Medicare levy doesn’t produce an enorm